It’s been a busy old year for the Office of Fair Trading, but are we getting value for our £49 million from its 700 staff?
Topic: Consumer protection
Who: The Office of Fair Trading
When: July 2004
The Office of Fair Trading published its annual report for 2003/2004.
Three of the key themes of the year which chairman John Vickers picks out are:
- the achievement of important practical results without formal enforcement action (the halting of misleading advertising for a major Barclays credit card offering is cited as an example of this);
- a readiness to go to court where necessary (an example here is the pending case to clarify whether consumer protection on credit cards extends to overseas purchases); and
- growth in appeals, which are to be expected especially where law is new, such as the Enterprise Act which came fully into force in June 2003 and amongst other things gave the OFT more paths to effective enforcement action in respect of breaches of a wide raft of consumer protection legislation.
In terms of its performance over the year, the OFT investigated 1,816 cases under the Unfair Terms in Consumer Contracts Regulations, the Distance Selling Regulations and the Control of Misleading Advertisements Regulations. Of these, 331 established that breaches of the law had arguably occurred, whilst the Enterprise Act was used as the legal basis for action in 97 consumer regulation enforcement cases between 20 June 2003, (when the OFT got its new powers) and 31 March 2004.
As an example of "joined up" action under the "Stop now order" regime which preceded the Enterprise Act powers, the report mentions the case of kitchen supplier Vance Miller. He was imprisoned for contempt of court after breaching a court order obtained by the OFT following more than 180 complaints to the OFT and Trading Standards Officers countrywide, who worked together to obtain and collate evidence.
Love in for enforcers
Generally 2003-2004 saw a large increase in the number of victims of deceptive marketing delivered by post, e-mail, telephone and text messaging, To help co-ordinate the responses to these by the enforcement community, the OFT held a seminar for 60 regulators and enforcement bodies including Trading Standards, the Advertising Standards Authority and the Office of the Information Commissioner.
Unfair terms and distance sales action
Under the Unfair Terms in Consumer Contracts Regulations, during 2003-2004 1,541 terms were abandoned or amended by 117 businesses in response to regulatory action by the OFT. The most commonly used unfair terms were exclusions or limitations of liability for shortcomings in the quality of goods or services and unfair price variations and financial penalty clauses.
On the distance selling regulations, the OFT is the lead enforcer and more than 33 traders changed their working practices or websites to comply with the regulations after being approached by the OFT during the period covered by the report. In total, 45 cases were opened and 453 enquiries were responded to, but it is quite clear from those numbers that the OFT was well justified in running a campaign to raise awareness of the regulations.
More misleading advertising than ever
In the land of misleading advertising, the OFT reports receiving more complaints in 2003-2004 than in any previous 12 month period. It worked on 632 cases and obtained 12 undertakings and 2 court orders.
Here holiday clubs get a particular mention. Three such organisations were investigated for making claims about their products that were considered false or misleading. Also mentioned is high street clothing retailer "The Officers' Club". In March 2004 court action was initiated against the retailer over misleading advertising consistently using "70% off" and thus creating the misleading impression that this was offering a reduction from genuine previous prices.
On consumer credit, the OFT became increasingly concerned about the number of credit ads that appeared to be contravening the Consumer Credit Act. A formal programme to monitor credit ads has been started and later in 2004-2005 "appropriate action" will be taken and a compliance review conducted.
Outdoor and international
Outdoor advertising did not escape the OFT's attention. It acted in partnership with Trading Standards Officers to stop estate agents putting "For sale" signs outside properties they were not marketing, whilst in the international arena the report mentions the recent landmark court action in Brussels against a Belgian mail order company Duchesne SA, trading as TV Direct.
The action was taken using, for the first time, the OFT's powers under Part 8 of the Enterprise Act to seek injunctions in other EU member states against breaches of EU consumer protection legislation which allegedly disadvantage UK consumers.
Typical examples of the Duchesne mailings sent to UK residents were said to be misleading since they appeared to notify recipients of a large prize win, typically of £10,000. To receive the prize the consumer was asked to make a purchase from the enclosed catalogue of household goods, but it turned out that there was no guaranteed free gift, only the possibility of winning a prize draw. It is currently not known whether the OFT's action is going to be disputed and a hearing is scheduled in the Commercial Court in Brussels in September 2004.
Also on the European stake, the OFT worked closely with the DTI to influence negotiations on the content of the draft framework directive on unfair commercial practices, previously reported on marketinglaw.co.uk.
The OFT believes the Directive will create sharper enforcement powers for use when the interests of UK consumers are being harmed by the activities of traders in other member states.
Working alongside the DTI, the OFT is also contributing to the development of the European Commission's proposal for a regulation on consumer protection co-operation. This provides for improved mutual assistance between EU member states consumer protection bodies when dealing with cross border infringements of European consumer protection law.
Why this matters:
With 700 staff and a budget of £49 million, the OFT admits that this is "a lot of tax payers' money," although it classifies itself as "much smaller than some regulators." The numbers of cases and complaints handled, however, are not huge and although it is undoubtedly good in many cases to avoid having to go to court to get a result, you wonder whether a few five figure, ICSTIS/FTC style fines would not only help defray the £49 million price tag, but also increase the profile of the OFT and the good works it does as a result of increased recourse to it by consumers and competitors.